Brazil's farms see quiet revolution
By Gary Duffy BBC News, Sao Paulo
On the family farm run by Joao Baggio Neto in the southern Brazilian state of Parana, you get some sense of the determination and competitive spirit that motivates Brazil's farmers.
Blessed with what often seems like endless amounts of land and a good climate, Brazil has grown in recent years to become an agricultural superpower.
Joao Baggio says the most important improvement in his part of the country in the past decade has been the increase in productivity.
"We came from a situation where we produced 5,000 kg of corn by hectare, while today it is 10 to 12,000 kg per hectare of corn," he says. "So we have doubled productivity in 10 years."
So it is no surprise that the government launched its latest agricultural plan in the state of Parana, famous for its grain-producing potential.
President Luiz Inacio Lula da Silva told farmers that concerns about food prices and shortages around the world offered them an exceptional opportunity.
"We have more Chinese people eating, we have more Indians eating, we have more Africans eating and we have a lot more Brazilians eating.
"All this, which is treated by the press as if it were a crisis and is sold to the world as if it were a crisis," he said.
"Without any arrogance or self-importance, we Brazilians need to confront what for others is a crisis, as an extraordinary opportunity to truly transform ourselves into the granary of the world, as many people have long predicted."
Huge potential
Joao Baggio is not a fan of government policy, but he does not disagree with the president's aspiration.
"Without any doubt, there is potential to produce if the government doesn't get in the way," he says.
"We are not even going to say help - if they don't get in the way a lot, year by year the producer is generally increasing production.
"If you talk about central Brazil, there are still a lot of areas to be exploited, so I don't have much doubt."
In fact, of the 350 million hectares of land available for agriculture across Brazil, analysts say only 70 to 80 million hectares are being used, and the potential for growth is enormous.
But there is also a consensus that the country has to deal with some key weaknesses, such as poor infrastructure - mainly in its ports and roads - and a high level of dependence on expensive imported fertilisers.
But for Professor Marcos Fava Neves of the University of Sao Paulo, the president is right to think on a grand scale, based on the country's recent achievements.
"What we have seen in the last 10 years is a quiet revolution happening in our country, mostly in agribusiness production," he says.
"We came from being an irrelevant international market participant to be one of the world's major food and biofuel suppliers today.
"So if you look at what happened to our agriculture in terms of beef exports, poultry exports - again we were irrelevant, and now we have the position of largest exporter in the world in major food crops."
Booming harvests
It is no surprise, then, that there was a confident opening for the annual gathering of Brazil's major agricultural producers in Sao Paulo.
The video presentation boasted of a record harvest - while the prediction for this year is that external sales of agricultural products could amount to $74bn, an increase of 26% on last year.
Outside the conference hall, the main point of discussion was a new report suggesting climate change could cause a significant drop in Brazil's food exports - perhaps as much as a quarter for soya over the next 12 years.
However, Agriculture Minister Reinhold Stephanes was adamant this concern over climate change could be addressed.
"The impact will start to emerge with more intensity within 20 to 30 years, and until then, we should be preparing for this," he said.
"The perspective for the moment for future harvests is highly productive. So Brazil has the potential to continue growing around 5% to 6% a year in terms of increasing harvests. We are going to effectively maintain this rhythm in the coming years without any problem."
Brazil's major producers also insist they can achieve growth in a sustainable way, even though activities such as cattle-ranching have been widely blamed for deforestation in the Amazon.
Investment drive
Watching the conference proceedings was Paulo Adario, campaigns director for Greenpeace, who says Brazil must meet its ambitions while protecting the environment at the same time.
"Greenpeace is not against food," he told the BBC. "We are not against expanding the Brazilian capacity for producing food, and helping Brazil to develop this country.
"You can increase the food capacity through technology, through better practices, through occupying areas that are already degraded, to investing in better crops. Brazil is already the world's biggest producer of orange juice.
"But you can not increase your productivity at the expense of the environment, because the global market doesn't accept this price any more."
Prof Neves says even by staying away from sensitive areas such as the Amazon, a huge amount can be achieved.
"If we have the right investments coming on for logistics, for infrastructure and for technology and land development, the country can multiply by two-and-a-half, three times the actual production in the next 10 years."
Prof Neves sees Brazil as being well placed to help bring worldwide food inflation down by increasing its productivity.
"Of course we have increases that could come from Europe, from the USA, from Canada, from Argentina," he says.
"But where you see the best conditions in order to give the world society the best rate of return in terms of investment is in Brazil.
"If you talk about the next five years, we are now producing 130 million tonnes of grains. We can easily go to 250 million tonnes.
"We are now producing seven million hectares of sugar cane. This can go to 20 million hectares, helping to supply ethanol to the world. We are only exporting $400m of fruits; we can go to $3bn of fruits."
Rising demand
It is not only in Brazil that Prof Neves sees potential.
"Next up is Africa. I think for Africa, this could be a redemption, in terms of inclusion of people in production systems and making Africa produce food and biofuels for the world."
Not so long ago, the Brazilian government's major social policy was the battle to ensure Zero Hunger among its own people. Yet now, its president says his country can be the food basket of the world.
A major family income support programme reaching 11 million of Brazil's least well off families undoubtedly helped, but recent research suggests rising prices are affecting some important basic food products.
In one city in the north-east of the country, Brazil's poorest region, an officially-monitored basic selection of food items has gone up by 50% over the last 12 months.
And given the scale of demand across the world, critics point out it is too much to expect Brazil to become its granary.
"World demand for food today is one billion tonnes, and Brazil produces 150 million tonnes," columnist Ariosto Teixeira of the Estado de Sao Paulo newspaper told Brazil's TV Globo.
"Brazil produces 150 million tonnes and the plan launched by the government for more food will produce six million more, which is going to leave one million for export. How is Brazil going to be the granary of food production?" he asked.
Despite this, Brazil undoubtedly exudes the sense of a country growing in confidence over its place as an agricultural producer, even allowing for the latest failure to reach agreement in world trade talks.
And along with other developing countries, the government remains optimistic that when it comes to the world's concerns over food, Brazil can make a difference.
Story from BBC NEWS:http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7567778.stmPublished: 2008/08/20 15:57:00 GMT© BBC MMVIII
Tuesday, September 2, 2008
from New York Times
July 31, 2008
Strong Economy Propels Brazil to World Stage
By ALEXEI BARRIONUEVO
FORTALEZA, Brazil — Desperate to escape her hand-to-mouth existence in one of Brazil’s poorest regions, Maria Benedita Sousa used a small loan five years ago to buy two sewing machines and start her own business making women’s underwear.
Today Ms. Sousa, a mother of three who started out working in a jeans factory making minimum wage, employs 25 people in a modest two-room factory that produces 55,000 pairs of cotton underwear a month. She bought and renovated a house for her family and is now thinking of buying a second car. Her daughter, who is studying to be a pharmacist, could be the first family member to finish college.
“You can’t imagine the happiness I am feeling,” Ms. Sousa, 43, said from the floor of her business, Big Mateus, named after a son. “I am someone who came from the countryside to the city. I battled and battled, and today my children are studying, with one in college and two others in school. It’s a gift from God.”
Today her country is lifting itself up in much the same way. Brazil, South America’s largest economy, is finally poised to realize its long-anticipated potential as a global player, economists say, as the country rides its biggest economic expansion in three decades.
That growth is being felt in nearly all parts of the economy, creating a new class of super rich even as people like Ms. Sousa lift themselves into an expanding middle class.
It has also given Brazil new swagger, providing it, for instance, with greater leverage to push for a tougher bargain with the United States and Europe in global trade talks. After seven years, those negotiations finally broke down this week over demands by India and China for safeguards for their farmers, a clear sign of the rising clout of these emerging economies.
Despite investor fears about the leftist bent of President Luiz Inácio Lula da Silva when he was elected to lead Brazil in 2002, he has demonstrated a light touch when it comes to economic stewardship, avoiding the populist impulses of leaders in Venezuela and Bolivia.
Instead, he has fueled Brazil’s growth through a deft combination of respect for financial markets and targeted social programs, which are lifting millions out of poverty, said David Fleischer, a political analyst and emeritus professor at the University of Brasília. Ms. Sousa is one such beneficiary.
Long famous for its unequal distribution of wealth, Brazil has shrunk its income gap by six percentage points since 2001, more than any other country in South America this decade, said Francisco Ferreira, a lead economist at the World Bank.
While the top 10 percent of Brazil’s earners saw their cumulative income rise by 7 percent from 2001 to 2006, the bottom 10 percent shot up by 58 percent, according to Marcelo Côrtes Neri, the director of the Center for Social Policies at the Getulio Vargas Foundation in Rio de Janeiro.
But Brazil is also outspending most of its neighbors on social programs, and overall public spending continues to be nearly four times as high as what Mexico spends as a percentage of its gross national product, Mr. Ferreira said.
The momentum of its economic expansion is expected to last. As the United States and parts of Europe struggle with recession and the fallout from housing crises, Brazil’s economy shows few of the vulnerabilities of other emerging powers.
It has greatly diversified its industrial base, has huge potential to expand a booming agricultural sector into virgin fields and holds a tremendous pool of untapped natural resources. New oil discoveries will thrust Brazil into the ranks of the global oil powers within the next decade.
Yet while exports of commodities like oil and agricultural goods have driven much of its recent growth, Brazil is less and less dependent on them, economists say, having the advantage of a huge domestic market — 185 million people — that has grown wealthier with the success of people like Ms. Sousa.
In fact, with a stronger currency and inflation mostly in check, Brazilians are on a spending spree that has become a prime motor for the economy, which grew 5.4 percent last year.
They are buying both Brazilian goods and a rising flood of imported products. Many businesses have relaxed credit terms to allow Brazilians to pay for refrigerators, cars and even plastic surgery over years instead of months, despite some of the highest interest rates in the world. In June the country reached 100 million credit cards issued, a 17 percent jump over last year.
At Casas Bahia, a modestly priced Brazilian furniture-store chain, the number of customers buying items on installment nearly tripled to 29.3 million from 2002 to 2007, said Sônia Mitaini, a company spokeswoman.
Other signs of new wealth abound. In Macaé, an oil boomtown near Rio de Janeiro, contractors are racing to finish new shopping malls and luxury housing to keep up with demand from oil-service firms. At a port in Angra dos Reis, a town known for its spectacular islands, some 25,000 workers have found jobs building oil platforms.
Petrobras, Brazil’s national oil company, shocked the oil world in November when it announced that its Tupi deepwater field offshore of Rio de Janeiro could hold five billion to eight billion barrels of oil. Analysts think there could be billions of barrels more in surrounding areas.
While the oil will be expensive and complicated to extract, Petrobras has said it expects to be producing up to 100,000 barrels a day from Tupi by 2010, and hopes to produce up to a million barrels a day in about a decade.
The new oil plays are setting off an investment boom in Rio de Janeiro, with an estimated $67.6 billion expected to flow into the state by 2010, according to the Rio de Janeiro State Federation of Industries, an industry group. Petrobras alone expects to invest $40.5 billion by 2012.
Some economists say a slowdown in the rest of the world’s economy, especially in Asia, which is soaking up much of Brazil’s exports of soybeans and iron ore, could crimp growth here. “But that probability is small,” said Alfredo Coutiño, the senior economist for Latin America for Moody’s Economy.com.
In fact, because Brazil’s economy has become so diversified in recent years, the country is less susceptible to a hangover from the struggling United States economy.
Brazil’s exports to the United States represent just 2.5 percent of Brazil’s gross national product, compared with 25 percent of G.N.P. for Mexican exports, according to Moody’s.
“What makes Brazil more resilient is that the rest of the world matters less,” said Don Hanna, the head of emerging market economics at Citibank.
The rest of the world certainly has helped. Soaring prices for minerals and other commodities have created a new class of super rich. The number of Brazilians with liquid fortunes exceeding $1 million grew by 19 percent last year, third behind China and India, according to a survey by Merrill Lynch and Capgemini.
At the same time, President da Silva has deepened many of the social programs begun 10 years ago under Fernando Henrique Cardoso, who as president ushered in many of the structural reforms that laid the foundations of Brazil’s stable growth today.
In Ms. Sousa’s case, for instance, she owes much of the success of her underwear business to loans she has received from the Bank of the Northeast, a government-financed bank that has awarded microloans to 330,000 people to develop businesses in this fast-growing region.
Other programs, like Bolsa Familia, give small subsidies to millions of poor Brazilians to buy food and other essentials. Bolsa Familia, which benefits 45 million people nationwide in distributing an annual budget of about $5.6 billion, has been far more effective at raising per-capita incomes than recent increases in the minimum wage, which has risen 36 percent since 2003.
The bottom-up nature of such social programs has helped expand formal and informal employment as well as the Brazilian middle class. The number of people under the poverty line — defined as those earning less than $80 a month — fell by 32 percent from 2004 to 2006, Mr. Neri said.
The programs have been particularly effective here in Brazil’s northeast, historically one of poorest parts of the country. Residents here have received more than half the $15.6 billion doled out in social programs from 2003 to 2006, according to Empresa de Pesquisa Energetica, an arm of the Energy Ministry.
People here are using that new wealth to buy items like televisions and refrigerators at a faster rate than the rest of the country. The northeast, in fact, passed the country’s south in electricity use this year for the first time, the energy agency said.
Many families have bridged the gap to the middle class by using Bolsa Familia to meet basic needs, and then applying for small loans to start businesses and escape the informal economy. That is what Maria Auxiliadora Sampaio and her husband did in Fortaleza, a coastal city of 2.4 million people. They were receiving Bolsa Familia payments of about $30 a month, which they used to support their three children. Then, two years ago, Ms. Sampaio used a microloan of about $190 to buy nail polish and kick-start her manicure business, which she runs from home.
Today she is making around $70 a day — about four minimum salaries per month, she said. With her next loan she plans to put about $140 toward a stove to sterilize nail clippers, which today she does with hot water.
The fruits of her new business have allowed the couple to retile their house and buy a television and a cellphone. This month her husband, who works at a Cachaça factory, was able to realize a dream: to buy a drum set.
He plans to use it in a band that plays forró, a traditional music in the northeast. “We always ate and paid bills, but he waited and waited,” and finally bought the set for about $780, she said.
“I feel like we are part of this group of people that are coming up in the world,” said Ms. Sampaio, 28. “When you don’t have anything, when you don’t have a profession, don’t have the means to live, you are no one, you are a mosquito. I was nothing. Today, I am in heaven.”
Mery Galanternick contributed reporting from Rio de Janeiro.
July 31, 2008
Strong Economy Propels Brazil to World Stage
By ALEXEI BARRIONUEVO
FORTALEZA, Brazil — Desperate to escape her hand-to-mouth existence in one of Brazil’s poorest regions, Maria Benedita Sousa used a small loan five years ago to buy two sewing machines and start her own business making women’s underwear.
Today Ms. Sousa, a mother of three who started out working in a jeans factory making minimum wage, employs 25 people in a modest two-room factory that produces 55,000 pairs of cotton underwear a month. She bought and renovated a house for her family and is now thinking of buying a second car. Her daughter, who is studying to be a pharmacist, could be the first family member to finish college.
“You can’t imagine the happiness I am feeling,” Ms. Sousa, 43, said from the floor of her business, Big Mateus, named after a son. “I am someone who came from the countryside to the city. I battled and battled, and today my children are studying, with one in college and two others in school. It’s a gift from God.”
Today her country is lifting itself up in much the same way. Brazil, South America’s largest economy, is finally poised to realize its long-anticipated potential as a global player, economists say, as the country rides its biggest economic expansion in three decades.
That growth is being felt in nearly all parts of the economy, creating a new class of super rich even as people like Ms. Sousa lift themselves into an expanding middle class.
It has also given Brazil new swagger, providing it, for instance, with greater leverage to push for a tougher bargain with the United States and Europe in global trade talks. After seven years, those negotiations finally broke down this week over demands by India and China for safeguards for their farmers, a clear sign of the rising clout of these emerging economies.
Despite investor fears about the leftist bent of President Luiz Inácio Lula da Silva when he was elected to lead Brazil in 2002, he has demonstrated a light touch when it comes to economic stewardship, avoiding the populist impulses of leaders in Venezuela and Bolivia.
Instead, he has fueled Brazil’s growth through a deft combination of respect for financial markets and targeted social programs, which are lifting millions out of poverty, said David Fleischer, a political analyst and emeritus professor at the University of Brasília. Ms. Sousa is one such beneficiary.
Long famous for its unequal distribution of wealth, Brazil has shrunk its income gap by six percentage points since 2001, more than any other country in South America this decade, said Francisco Ferreira, a lead economist at the World Bank.
While the top 10 percent of Brazil’s earners saw their cumulative income rise by 7 percent from 2001 to 2006, the bottom 10 percent shot up by 58 percent, according to Marcelo Côrtes Neri, the director of the Center for Social Policies at the Getulio Vargas Foundation in Rio de Janeiro.
But Brazil is also outspending most of its neighbors on social programs, and overall public spending continues to be nearly four times as high as what Mexico spends as a percentage of its gross national product, Mr. Ferreira said.
The momentum of its economic expansion is expected to last. As the United States and parts of Europe struggle with recession and the fallout from housing crises, Brazil’s economy shows few of the vulnerabilities of other emerging powers.
It has greatly diversified its industrial base, has huge potential to expand a booming agricultural sector into virgin fields and holds a tremendous pool of untapped natural resources. New oil discoveries will thrust Brazil into the ranks of the global oil powers within the next decade.
Yet while exports of commodities like oil and agricultural goods have driven much of its recent growth, Brazil is less and less dependent on them, economists say, having the advantage of a huge domestic market — 185 million people — that has grown wealthier with the success of people like Ms. Sousa.
In fact, with a stronger currency and inflation mostly in check, Brazilians are on a spending spree that has become a prime motor for the economy, which grew 5.4 percent last year.
They are buying both Brazilian goods and a rising flood of imported products. Many businesses have relaxed credit terms to allow Brazilians to pay for refrigerators, cars and even plastic surgery over years instead of months, despite some of the highest interest rates in the world. In June the country reached 100 million credit cards issued, a 17 percent jump over last year.
At Casas Bahia, a modestly priced Brazilian furniture-store chain, the number of customers buying items on installment nearly tripled to 29.3 million from 2002 to 2007, said Sônia Mitaini, a company spokeswoman.
Other signs of new wealth abound. In Macaé, an oil boomtown near Rio de Janeiro, contractors are racing to finish new shopping malls and luxury housing to keep up with demand from oil-service firms. At a port in Angra dos Reis, a town known for its spectacular islands, some 25,000 workers have found jobs building oil platforms.
Petrobras, Brazil’s national oil company, shocked the oil world in November when it announced that its Tupi deepwater field offshore of Rio de Janeiro could hold five billion to eight billion barrels of oil. Analysts think there could be billions of barrels more in surrounding areas.
While the oil will be expensive and complicated to extract, Petrobras has said it expects to be producing up to 100,000 barrels a day from Tupi by 2010, and hopes to produce up to a million barrels a day in about a decade.
The new oil plays are setting off an investment boom in Rio de Janeiro, with an estimated $67.6 billion expected to flow into the state by 2010, according to the Rio de Janeiro State Federation of Industries, an industry group. Petrobras alone expects to invest $40.5 billion by 2012.
Some economists say a slowdown in the rest of the world’s economy, especially in Asia, which is soaking up much of Brazil’s exports of soybeans and iron ore, could crimp growth here. “But that probability is small,” said Alfredo Coutiño, the senior economist for Latin America for Moody’s Economy.com.
In fact, because Brazil’s economy has become so diversified in recent years, the country is less susceptible to a hangover from the struggling United States economy.
Brazil’s exports to the United States represent just 2.5 percent of Brazil’s gross national product, compared with 25 percent of G.N.P. for Mexican exports, according to Moody’s.
“What makes Brazil more resilient is that the rest of the world matters less,” said Don Hanna, the head of emerging market economics at Citibank.
The rest of the world certainly has helped. Soaring prices for minerals and other commodities have created a new class of super rich. The number of Brazilians with liquid fortunes exceeding $1 million grew by 19 percent last year, third behind China and India, according to a survey by Merrill Lynch and Capgemini.
At the same time, President da Silva has deepened many of the social programs begun 10 years ago under Fernando Henrique Cardoso, who as president ushered in many of the structural reforms that laid the foundations of Brazil’s stable growth today.
In Ms. Sousa’s case, for instance, she owes much of the success of her underwear business to loans she has received from the Bank of the Northeast, a government-financed bank that has awarded microloans to 330,000 people to develop businesses in this fast-growing region.
Other programs, like Bolsa Familia, give small subsidies to millions of poor Brazilians to buy food and other essentials. Bolsa Familia, which benefits 45 million people nationwide in distributing an annual budget of about $5.6 billion, has been far more effective at raising per-capita incomes than recent increases in the minimum wage, which has risen 36 percent since 2003.
The bottom-up nature of such social programs has helped expand formal and informal employment as well as the Brazilian middle class. The number of people under the poverty line — defined as those earning less than $80 a month — fell by 32 percent from 2004 to 2006, Mr. Neri said.
The programs have been particularly effective here in Brazil’s northeast, historically one of poorest parts of the country. Residents here have received more than half the $15.6 billion doled out in social programs from 2003 to 2006, according to Empresa de Pesquisa Energetica, an arm of the Energy Ministry.
People here are using that new wealth to buy items like televisions and refrigerators at a faster rate than the rest of the country. The northeast, in fact, passed the country’s south in electricity use this year for the first time, the energy agency said.
Many families have bridged the gap to the middle class by using Bolsa Familia to meet basic needs, and then applying for small loans to start businesses and escape the informal economy. That is what Maria Auxiliadora Sampaio and her husband did in Fortaleza, a coastal city of 2.4 million people. They were receiving Bolsa Familia payments of about $30 a month, which they used to support their three children. Then, two years ago, Ms. Sampaio used a microloan of about $190 to buy nail polish and kick-start her manicure business, which she runs from home.
Today she is making around $70 a day — about four minimum salaries per month, she said. With her next loan she plans to put about $140 toward a stove to sterilize nail clippers, which today she does with hot water.
The fruits of her new business have allowed the couple to retile their house and buy a television and a cellphone. This month her husband, who works at a Cachaça factory, was able to realize a dream: to buy a drum set.
He plans to use it in a band that plays forró, a traditional music in the northeast. “We always ate and paid bills, but he waited and waited,” and finally bought the set for about $780, she said.
“I feel like we are part of this group of people that are coming up in the world,” said Ms. Sampaio, 28. “When you don’t have anything, when you don’t have a profession, don’t have the means to live, you are no one, you are a mosquito. I was nothing. Today, I am in heaven.”
Mery Galanternick contributed reporting from Rio de Janeiro.
An Introduction to the Opportunities in Brazilian Food and Agribusiness
Brazil is a geographically large country with potential to be a global food and agribusiness powerhouse. This blog was created, in part, to catalogue thoughts on its development and potential opportunities as they are identified. Of course, it will also be used to present my views on the subject.
My interest in Brazil emerged with a trip there to investigate trade opportunities in 2003. At that time, it was apparent that the food and agribusiness opportunities were enormous; but, they also required a lot development and caution.
Since, I have been convinced that Brazil will acheive a level of economic strength that will surprise most including many Brazilians. Food and agribusiness industries are likely to be leaders in this development.
On a personal note, my relationship with that country has developed to the point where I married one of its female citizens.
Going forward, I hope to share some insights as well as catalogue various reports published elsewhere so that these thoughts can be consolidated in one place.
My interest in Brazil emerged with a trip there to investigate trade opportunities in 2003. At that time, it was apparent that the food and agribusiness opportunities were enormous; but, they also required a lot development and caution.
Since, I have been convinced that Brazil will acheive a level of economic strength that will surprise most including many Brazilians. Food and agribusiness industries are likely to be leaders in this development.
On a personal note, my relationship with that country has developed to the point where I married one of its female citizens.
Going forward, I hope to share some insights as well as catalogue various reports published elsewhere so that these thoughts can be consolidated in one place.
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